When your new employee fills out a W-4, it affects their withholdings for Federal Income Tax, Social Security, and Medicare. What does it mean for the business owner?
Businesses are required by the IRS to withhold taxes from employee wages, and then pay them directly to the IRS. This usually occurs on a quarterly basis in March, June, September, and December. This type of tax is called a Payroll Tax. In some instances, the IRS allows a business to file payroll taxes annually instead of quarterly. Payment can be made electronically or in person at an authorized financial institution. The IRS dictates to the business when deposits should be made, with requirements updated yearly based upon the annual payroll of the business.
Since the money is deducted from the employee’s paycheck at the time of issuance, payroll taxes are usually held in an escrow or escrow-like fund by the business owner. This money cannot be used for any other purpose as it is owed directly to the IRS on behalf of the employee. If that money is not transferred to the IRS on the quarterly or annual time frame as agreed, the business will incur an outstanding liability to the IRS, commonly known as a Payroll Tax Debt. Owing IRS Payroll Taxes can mean very substantial penalties, fees, and interest. It is therefore very important to make timely deposits to avoid these costly penalties and fees.
If your business finds itself owning a payroll tax debt, it is important to get help to resolve these payroll back taxes as soon as possible to start on the path to tax relief. The IRS enforcement with Payroll Tax Debt is aggressive. If it is determined that the outstanding payroll taxes cannot be paid, the IRS will focus in on the individuals that they deem responsible. These can include not only the business owner but potentially the business employees responsible for the processing or filing of the payroll taxes on behalf of the company.
If you need help with getting your payroll taxes current, the team at BusinessTaxPreparation.com has the expertise to help with all of your business tax services. Call the professionals at (866) 676-9417 or email info@businesstaxpreparation.com for a free, no obligation consultation with a CPA today.